ArcelorMittal Nippon May Review Rs 1-Lakh-Crore Capex As India Imposes Steel Export Duty

ArcelorMittal Nippon Steel India Ltd. may reconsider its planned capital expenditure of Rs 1 lakh crore over 10 years after the government imposed export duty on a variety of finished steel products.

An investment for capacity expansion at a time when demand is tepid wouldn’t be logical, given that the existing capacity is already struggling to find a home, Dilip Oommen, chief executive officer at the joint venture between ArcelorMittal and Nippon, told BQ Prime in an interview.

Oommen, also the president of the Indian Steel Association, said utilisation levels would come down to 75% from existing 87% with the imposition of export duty and the industry would lose at least $150 per tonne in realisation.

According to a January note by Crisil, ArcelorMittal Nippon Steel India has a capex plan of around Rs 45,000 crore for completion of ongoing projects, de-bottlenecking, reconfiguration of assets, and expansion of upstream and downstream facility along with acquisition of ancillary assets. That's aimed at increasing steel manufacturing capacity at the Hazira plant to 14 metric tonnes per annum from 8.6 MTPA currently, the note said.

Additionally, the company requires long-term capex for setting up 12-MTPA greenfield steel manufacturing unit in Odisha and other renewable energy projects, the rating agency said.

The company's CEO is hopeful that the government would reconsider its decision and possibly retract or moderate its stance on export duty. According to him, the government's action was sudden and came without consultations with private steelmakers.

While he didn't clarify whether the focus would shift on exporting semi-finished steel products, Oommen said the industry has no Plan B to tide over the issue, except for writing to various ministries and holding discussions for reaching a consensus.

ArcelorMittal Nippon Steel recently confirmed a proposed investment of Rs 1,000 crore towards brownfield expansion of its Vizag pellet plant in Andhra Pradesh. The planned expansion will increase pellet production capacity at Vizag by 35%, from 8 MTPA to 11 MTPA.

The company is a 60:40 joint venture between ArcelorMittal and Nippon Steel. It acquired the erstwhile Essar Steel India Ltd. in bankruptcy proceeding in December 2019, and renamed it as ArcelorMittal Nippon Steel India.

The company is the fourth largest domestic flat steel manufacturer after Steel Authority of India Ltd., Tata Steel Ltd. and JSW Steel Ltd., with an installed crude steelmaking capacity of 9.6 MTPA.

In FY21-22, it produced 7.298 million tonnes of crude steel. On a standalone basis, it reported operating income and profit after tax of Rs 26,891 crore and Rs 6,008 crore, respectively, according to Crisil.

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